MASTER 
NEGATIVE 

NO.  94-821 89 


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Author: 


Belmont,  August,  &  Co. 


Title: 


The  tax  on  your  income 


Place: 


New  York  City 


Date: 


[1913] 


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Columbia  University 

H'^AY  2  4  1941 


The  Tax 

On  Your  Income 


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QN  THE  FOLLOWING  PAGES 

^^^  will  be  found  a  synopsis  of  the 
Income  Tax  Law  recently  enacted  by 
the  Congress  of  the  United  States. 
This  synopsis  of  the  statute  as  it  relates 
to  individuals  has  been  prepared  for  the 
benefit  of  our  customers  who  are  de- 
sirous of  not  only  getting  at  the  gist  of 
the  subject  but  who  are  anxious  to  know 
just  how  it  will  affect  them.  We  trust 
that  it  clearly  sets  forth  the  provisions  of 
the  law.     ::      ::      ::      ::      ::      ::      :: 


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SYNOPSIS 

L  Persons  liable  for  tax 

II.  The  income  tax 

III.  What  constitutes  income 

IV.  What  does  not  constitute  income 

V.  Deductions  allowed  from  income 

VI.  Deductions  not  allowed  from  income 

VII.  Specific  exemption  allowed 

VIII.  The  taxable  year 

IX.  Statement  or  return  of  income 

X.  Who  are  required  to  make  rttums 

XI.  Who  are  not  required  to  make  returns 

XII.  Collection  at  the  source 

XIII.  How  exemptions  and  deductions  are  secured 

XIV.  Assessment  and  payment  of  tax 


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4) 


THE  INCOME  TAX 


I.  PERSONS  LIABLE  FOR  TAX : 

The  tax,  as  its  name  indicates,  is  levied  against  income 
and  not  against  tangible  wealth,  such  as  realty  and  personalty, 
the  tax  on  which  is  assessed  locally.  The  law  states  that 
the  net  incomes  of  the  following  individuals  are  subject  to 
this  tax: 

z.  All  citizens  of  the  United  States,  whether  residing 
at  home  or  abroad 

2.  All  persons  residing  in  the  United  States,  though 
not  citizens  thereof 

3.  Non-resident  aliens  on  that  income  derived  from 
property  in  the  United  States  or  from  carrying 
on  any  business,  trade  or  profession  in  the  United 
States. 

II.  THE  INCOME  TAX : 

The  income  tax  law  as  enacted  by  Congress  and  which 
became  a  law  on  October  3,  19 13,  provides  for  a  progressive 
tax  ranging  from  i  per  cent,  to  7  per  cent,  per  annum,  accord- 
ing to  the  amount  of  income  received.  In  order  to  facilitate 
its  collection  the  tax  is  divided  into  two  parts — the  normal 
tax  and  the  additional  tax.  The  normal  tax,  amounting  to 
a  fixed  rate  of  i  per  cent,  is  collected  for  the  most  part  at 
the  source,  while  the  additional  tax,  with  various  rates 
according  to  the  amount  of  income  received,  is  a  direct  assess- 
ment against  the  taxpayer.  A  fixed  rate  is  easy  to  collect 
at  the  source  while  a  progressive  tax,  varying  with  each 
individual,  can  only  be  collected  with  ease  by  a  direct  assess- 
ment against  the  individual — hence  the  distinction  in  the  law 
between  a  normal  and  an  additional  tax. 


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This  additional  tax  is  as  follows: 

1%  on  amt.  of  income  over  $20,000,  but  not  over  $50,000 

"      "       "         75,000 


2 

3 

4 

5 
6 


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100,000 
250,000 
500,000 


50,000 
75,000 
100,000 
250,000 
500,000 
if  an  unmarried  man's  income  should  amount 
to  say  $750,000  per  annum,  his  tax  would  be  computed  as 
follows : 

Net  income    $750,000 

Exemption    3,000 

Subject  to  normal  tax 747,000 

Normal  tax  of  1%  on  $747,000 $7»470 

Additional  tax  on  $747,000: 

1%  on  $30,000  ($20,000  to  $50,000)...$      300 


2 

3 

4 

5 
6 


(( 


it 


(( 


25»ooo  (  50,000  to    75,000) . . .        500 
25,000  (  75,000  to  100,000) . . .        750 
150,000  (100,000  to  250,000)...     6,000 
250,000  (250,000  to  500,000) . . .   12,500 
"  247,000  (500,000  to  747,000) . . .    14,820 
Amount  of  additional  tax 34,870 

TOTAL  AMOUNT   OF  TAX $42,340 

The  tax,  as  we  have  seen,  is  based  on  net  income.  It  is 
therefore,  highly  important  that  we  know  just  what  consti- 
tutes net  income. 

III.  WHAT  CONSTITUTES  INCOME: 

The  law  states  that  "the  net  income  of  a  taxable  person 
shall  include 

a.  "Gains,  profits,  and  income  derived  from  salaries, 
wages,  or  compensation  for  personal  service  of 
whatever  kind  and  in  whatever  form  paid,  or 
from  professions,  vocations,  businesses,  trade, 
commerce,*  or  sales,  or  dealings  in  property, 
whether  real  or  personal,  growing  out  of  the 
ownership  or  use  of  or  interest  in  real  or  personal 
property,  also  from 


,    , 


b.  "Interest,  rent,  dividends,  securities,  or  the  trans- 

action of  any  lawful  business  carried  on  for  gain 
or  profit,  or 

c.  "Gains  or  profits  and  income  derived  from  any 

source  whatever,  including  the  income  from  but 
not  the  value  of  property  acquired  by  gift,  be- 
quest, devise,  or  descent." 

In  the  statement  of  income  must  be  included,  in  the  case 
of  a  member  of  a  firm,  that  portion  of  the  yearly  profits  to 
which  he  is  entitled,  whether  personally  received  or  not,  as 
partnerships,  unlike  corporations,  are  not  liable  for  the  income 
tax.  Partners  are  liable  for  the  tax  only  in  their  individual 
capacity. 

As  the  net  earnings  of  corporations  are  subject  to  the 
normal  tax  of  i  per  cent,  only,  and  not  to  the  additional  tax, 
there  is  incorporated  in  the  law  a  provision  against  the  ac- 
cumulation of  a  surplus  for  the  purpose  of  evading  the  addi- 
tional tax  by  stockholders.    This  provision  reads  as  follows: 

"For  the  purpose  of  this  additional  tax  the  taxable 
income  of  any  individual  shall  embrace  the  share  to 
which  he  would  be  entitled  of  the  gains  and  profits, 
if  divided  or  distributed,  whether  divided  or  distrib- 
uted or  not,  of  all  corporations,  joint  stock  com- 
panies or  associations  however  created  or  organized, 
formed  or  fraudulently  availed  of  for  the  purpose 
of  preventing  the  imposition  of  such  tax  through 
the  medium  of  permitting  such  gains  and  profits  to 
accumulate  instead  of  being  divided  or  distributed; 
and  the  fact  that  any  such  corporation,  joint  stock 
company,  or  association,  is  a  mere  holding  company, 
or  that  the  gains  and  profits  are  permitted  to  ac- 
cumulate beyond  the  reasonable  needs  of  the  busi- 
ness shall  be  prima  facie  evidence  of  a  fraudulent 
purpose  to  escape  such  tax;  but  the  fact  that  the 
gains  and  profits  are  in  any  case  permitted  to 
accumulate  and  become  surplus  shall  not  be  con- 
strued as  evidence  of  a  purpose  to  escape  the  said 
tax  in  such  case  unless  the  Secretary  of  the  Treas- 


I 


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ury  shall  certify  that  in  his  opinion  such  accumu- 
lation is  unreasonable  for  the  purposes  of  the  busi- 
ness. When  requested  by  the  Commissioner  of 
Internal  Revenue,  or  any  district  collector  of  internal 
revenue,  such  corporation,  joint  stock  company,  or 
association  shall  forward  to  him  a  correct  statement 
of  such  profits  and  the  names  of  the  individuals 
who  would  be  entitled  to  the  same  if  distributed." 

IV.  WHAT  DOES  NOT  CONSTITUTE  INCOME: 


I. 


2. 


'The  value  of  property  acquired  by  gift,  bequest, 
devise,  or  descent." 

The  proceeds  of  life  insurance  policies  paid  upon 
the  death  of  the  person  insured  or  payments  made 
by  or  credited  to  the  insured,  on  life  insurance, 
endowment,  or  annuity  contracts,  upon  the  re- 
turn thereof  to  the  insured  at  the  maturity  of 
the  term  mentioned  in  the  contract,  or  upon  the 
surrender  of  the  contract." 

In  computing  net  income  there  shall  be  excluded: 

1.  Interest  upon  obligations  of  a  State  or  any 
political  subdivision  thereof 

2.  Interest  upon  the  obligations  of  the  United  States 
or  its  possessions 

3.  The  compensation  of  the  present  President  during 
the  term  for  which  he  has  been  elected. 

4.  The  compensation  of  the  Judges  of  the  Supreme 
and  Inferior  courts  of  the  United  States  now  in 
office 

5.  The  compensation  of  all  officers  and  employees 
of  a  State  or  any  political  sub-division  thereof, 
except  when  such  compensation  is  paid  by  the 
United  States  Government  (as  Senators  and  Rep- 
resentatives in  Congress) 

V.  DEDUCTIONS  ALLOWED  FROM  INCOME: 

In  computing  net  income  for  the  purpose  of  the  normal 
tax  of  I  per  cent,  there  shall  be  allowed  as  deductions: 


<       >    i> 


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z.  Necessary  expenses  actually  paid  in  carrying  on 
any  business,  not  including  personal,  living  or 
family  expenses 

a.  All  interest  paid  within  the  year  by  a  taxable 
person  on  indebtedness 

3.  All  national.  State,  county,  school,  and  municipal 
taxes  paid  within  the  year,  not  including  those 
assessed  against  local  benefits,  which  add  to  the 
value  of  property  and  do  not  take  away  as  an 
expense,  such  as  sidewalks,  etc. 

4.  Losses  actually  sustained  during  the  year,  incurred 
in  trade  or  arising  from  fires,  storms,  or  ship- 
wreck, and  not  compensated  for  by  insurance  or 
otherwise 

5  Debts  due  to  the  taxpayer  actually  ascertained  to 
be  worthless  and  charged  off  within  the  year 

6.  A  reasonable  allowance  for  the  exhaustion,  wear 
and  tear  of  property  arising  out  of  its  use  or  em- 
ployment in  the  business,  not  to  exceed,  in  the 
case  of  mines,  5  per  centum  of  the  gross  value  at 
the  mines  of  the  output  for  the  year  for  which  the 
computation  is  made 

7.  The  amount  received  as  dividends  upon  the  stock 
or  from  the  net  earnings  of  any  corporation,  joint 
stock  company,  association,  or  insurance  com- 
pany which  is  taxable  upon  its  net  income 

8.  The  amount  of  income,  the  normal  tax  upon  which 
has  been  paid  or  withheld  for  payment  at  the 
source 

Although  the  law  does  not  definitely  so  state  the  above  de- 
ductions are  also  undoubtedly  allowable  in  ascertaining  the 
amount  of  net  income  subject  to  the  additional  tax,  with  the 
exception  of  No.  7  and  No.  8.  As  corporations  pay  the  normal 
tax  only  the  dividends  in  the  hands  of  the  individual  are 
subject  to  the  additional  tax.  It  is  obvious  that  No.  8  cannot 
be  deducted  for  the  purpose  of  the  additional  tax. 


II 


1^ 


VI.  DEDUCTIONS  NOT  ALLOWED  FROM  INCOME: 

1.  All  personal,  living  or  family  expenses 

2.  Taxes  assessed  against  local  benefits,  such  as  for 
sidewalks,  curbing,  etc.,  which  add  to  the  value 
of  property 

3.  All  expense  of  restoring  property  or  making  good 
the  exhaustion  thereof  for  which  an  allowance  has 
been  made;  for  instance  the  expense  of  repairing 
a  house  damaged  by  fire  which  is  covered  by  in- 
surance 

4.  Amounts  paid  for  new  buildings,  permanent  im- 
provements, or  betterments  made  to  increase  the 
value  of  any  property  or  estate. 

The  following  are  not  allowed  to  be  deducted  for  the  pur- 
pose of  computing  the  additional  tax: 

1.  The  amount  received  as  dividends  upon  the  stock 
or  from  the  net  earnings  of  any  corporation,  joint 
stock  company,  association,  or  insurance  company 

2.  The  amount  of  income,  the  normal  tax  upon  which 
has  been  paid  or  withheld  from  payment  at  the 
source. 

VIL  SPECIFIC  EXEMPTION  ALLOWED: 

After  net  income  has  been  ascertained  in  accordance  with 
the  foregoing  provisions,  the  law  allows  a  certain  portion  of 
net  income  exempted  from  the  tax  to  cover  personal,  living 
and  family  expenses.     The  exemptions  are  as  follows: 

For  taxable  person $3^000 

For  married  man  with  a  wife  living  with  him 

and   vice  versa ^^qoo 

But  in  no  event  shall  the  $1,000  additional  be 

deducted  by  both  husband  and  wife. 
"Provided,  That  only  one  deduction  of  $4,000  shall 
be  made  from  the  aggregate  income  of  both  hus- 
band and  wife  when  living  together." 

Vin.  THE  TAXABLE  YEAR: 

The  tax  shall  be  computed  upon  the  remainder  of  the 
net  income  for  the  year  ending  December  31,  except  that  for 

8 


the  year  1913,  the  tax  shall  be  computed  only  on  that  portion 
of  the  income  accruing  from  March  i  to  December  31,  from 
which  only  five-sixths  of  the  specific  exemptions  and  deduc- 
tions may  be  deducted.  The  tax  for  only  ten  months  of  the 
present  year  is  due  to  the  fact  that  the  XVI  amendment  to 
the  Constitution  granting  Congress  power  to  levy  an  income 
tax  was  not  effective  until  the  latter  part  of  February,  1913. 

IX.  STATEMENT  OR  "RETURN"  OF  INCOME: 

The  return  or  statement  of  income,  if  it  amounts  to  $3,000 
or  over  must  be  made  by  March  i  in  each  year,  to  the  col- 
lector of  internal  revenue  for  the  district  in  which  the  in- 
dividual resides,  or  has  his  principal  place  of  business.  The 
return  of  a  person  residing  in  a  foreign  country  must  be  made 
in  the  place  where  his  principal  business  is  carried  on  within 
the  United  States.  The  return  must  be  made  under  oath  or 
affirmation  and  the  form  will  be  prescribed  by  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury. 

"If  the  collector  or  deputy  collector  have  reason  to 
believe  that  the  amount  of  any  income  returned  is 
understated,  he  shall  give  due  notice  to  the  person 
making  the  return  to  show  cause  why  the  amount 
of  the  return  should  not  be  increased,  and  upon  proof 
of  the  amount  understated  may  increase  the  same 
accordingly.  If  dissatisfied  with  the  decision  of  the 
collector,  such  person  may  submit  the  case,  with  all 
the  papers,  to  the  Commissioner  of  Internal  Revenue 
for  his  decision,  and  may  furnish  sworn  testimony 
of  witnesses  to  prove  any  relevant  facts." 

In  case  of  neglect  or  refusal  to  make  returns,  or  in  cases 
of  fraudulent  or  false  returns,  upon  discovery  within  three 
years  after  said  return  is  due,  the  Commissioner  of  Internal 
Revenue  shall  make  such  return  himself.  Any  party  liable  to 
make  return  who  refuses  or  neglects  to  make  a  return  of 
his  income  is  liable  to  a  penalty  of  not  less  than  $20  nor  more 
than  $1,000,  and  in  case  of  a  frauluent  return  the  guilty  party 
shall  be  fined  not  exceeding  $2,000  or  be  imprisoned  not  ex- 


ceeding  one  year,  or  both.  The  law  also  states  that  in  the 
case  of  false  or  fraudulent  returns  the  Commissioner  of 
Internal  Revenue  shall  add  loo  per  centum  to  the  tax  and  in 
the  case  of  refusal  or  neglect  50  per  centum. 

X.  WHO  ARE  REQUIRED  TO  MAKE  RETURNS: 

1.  Each  person  of  lawful  age,  subject  to  the  tax, 
having  a  net  income  of  $3,000  or  over  for  the 
taxable  year. 

2.  Guardians,  trustees,  .^executors,  administrators, 
agents,  receivers,  conservators,  and  all  persons, 
corporations,  or  associations  acting  in  any  fidu- 
ciary capacity,  shall  make  and  render  a  return  of 
the  net  income  of  the  person  for  whom  they  act, 
subject  to  this  tax,  coming  into  their  custody  or 
control  and  management.  Where  there  are  two 
or  more  joint  guardians,  etc.,  only  one  of  them  need 
make  the  return,  such  return  to  be  filed  with  the 
collector  of  the  district  where  the  party  for  whom 
he  acts  resides,  or  where  the  will  or  other  instru- 
ment under  which  he  acts  is  recorded. 

3.  All  parties  withholding  the  normal  tax  at  the 
source  as  stated  in  Section  XII  of  this  synopsis 
must  make  a  return,  but  separate  and  distinct,  of 
the  portion  of  the  income  of  each  person  from 
whom  the  normal  tax  has  been  withheld,  giving 
the  name  and  address  of  such  person  so  far  as 
is  known,  but  no  return  of  income  not  exceeding 
$3,000  shall  be  required. 

XL  WHO  ARE  NOT  REQUIRED  TO  MAKE  RETURNS : 

1.  Persons  whose  net  income  does  not  exceed  $3,000. 

2.  Persons  for  whom  return  has  been  made  unless 
there  is  other  income. 

XII.  COLLECTION  AT  THE  SOURCE: 

If  the  income  is  fixed  and  determinable  and  exceeds 
$3,000  for  any  taxable  year  the  normal  tax  of  1%  is  withheld 
at  the  source  and  paid  to  the  Government: 

10 


"All  persons,  firms,  copartnerships,  companies,  cor- 
porations, joint-stock  companies  or  associations,  and 
insurance  companies,  in  whatever  capacity  acting, 
including  lessees  or  mortgagors  of  real  or  personal 
property,  trustees  acting  in  any  trust  capacity,  ex- 
ecutors, administrators,  agents,  receivers,  conser- 
vators, employers,  and  all  officers  and  employees 
of  the  United  States  having  the  control,  receipt, 
custody,  disposal,  or  payment  of  interest,  rent,  sal- 
aries, wages,  premiums,  annuities,  compensation, 
remuneration,  emoluments,  or  other  fixed  or  de- 
terminable annual  gains,  profits,  and  income  of 
another  person,  exceeding  $3,000  for  any  taxable 
year,  other  than  dividends  on  capital  stock,  or  from 
the  net  earnings  of  corporations  and  joint-stock  com- 
panies or  associations  subject  to  like  tax,  who  are 
required  to  make  and  render  a  return  in  behalf  of 
another,  as  provided  herein,  to  the  collector  of  his, 
her,  or  its  district,  are  hereby  authorized  and  required 
to  deduct  and  withhold  from  such  annual  gains, 
proRts  and  income  such  sum  as  will  be  sufficient 
to  pay  the  normal  tax  imposed  thereon  by  this 
section,  and  shall  pay  to  the  officer  of  the  United 
States  Government  authorized  to  receive  the  same; 
and  they  are  each  hereby  made  personally  liable 
for  such  tax." 

The  normal  tax  will  not,  however,  be  deducted  at  the 
source  prior  to  November  i,  1913. 

From  the  foregoing  provision  it  will  be  seen  that  unless 
the  annual  income  from  a  given  source  amounts  to  $3,000 
there  is  no  deduction  for  the  normal  tax.  There  are,  how- 
ever, certain  specified  cases  where  it  is  deducted  and  with- 
held at  the  source  even  though  the  income  does  not  amount 
to  $3,000,  and  they  are : 

z.  Incomes  derived  from  interest  upon  bonds,  and 
mortgages,  or  deeds  of  trust,  or  other  similar 
obligations  of  corporations,  joint-stock  companies 
or  associations,  and  insurance  companies,  whether 
payable  annually  or  at  shorter  or  longer  periods. 

11 


t 


2.  Incomes  composed  of  coupons,  checks  or  bills  of 
exchange  for  or  in  payment  of  interest  upon  bonds 
of  foreign  countries  and  upon  foreign  mortgages 
or  like  obligations  (not  payable  in  the  United 
States) 

3.  Incomes  composed  of  coupons,  checks,  or  bills  of 
exchange  for  or  in  payment  of  any  dividends  upon 
the  stock,  or  interest  upon  the  obligations  of 
foreign  corporations,  associations,  and  insurance 
companies  engaged  in  business  in  foreign 
countries. 

Dealers  in  foreign  exchange  are  to  withhold  the  tax 
on  the  foreign  payments  coming  through  their  hands  and 
furthermore  they  are  required  under  the  law  to  obtain  a 
license  from  the  Commissioner  of  Internal  Revenue. 

XIII.   HOW   EXEMPTIONS  AND   DEDUCTIONS   ARE 
SECURED: 

In  the  case  of  the  additional  tax,  where  return  of  income 
is  made,  there  is  no  trouble  about  securing  the  exemptions 
and  deductions  to  which  one  is  entitled.  When  it  comes  to 
the  normal  tax,  however,  withheld  at  the  source,  in  order 
for  the  taxpayer  to  secure  the  specific  exemptions  allowed 
(Section  VII  of  this  synopsis) : — 

"He  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due,  file  with 
the  person  who  is  required  to  withhold  and  pay  tax 
for  him,  a  signed  notice  in  writing  claiming  the 
benefit  of  such  exemption  and  thereupon  no  tax  shall 
be  withheld  upon  the  amount  of  such  exemption." 

"If  any  person  for  the  purpose  of  obtaining  any 
allowance  or  reduction  by  virtue  of  a  claim  for  such 
exemption,  either  for  himself  or  for  any  other 
person,  knowingly  makes  any  false  statement  or 
false  or  fraudulent  representation,  he  shall  be  liable 
to  a  penalty  of  $300." 

If  the  taxpayer  desires  to  secure  any  of  the  deductions 
enumerated  in  Section  V  of  this  synopsis  to  which  he  is 
entitled : — 

12 


"He  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due,  either 
file  with  the  person  who  is  required  to  withhold 
and  pay  tax  for  him  a  true  and  correct  return  of  his 
annual  gains,  profits,  and  income  from  all  other 
sources,  and  also  the  deductions  asked  for,  and  the 
showing  thus  made  shall  then  become  a  part  of  the 
return  to  be  made  in  his  behalf  by  the  person  re- 
quired to  withhold  and  pay  the  tax,  or  likewise  make 
application  for  deductions  to  the  collector  of  the  dis- 
trict in  which  return  is  made  or  to  be  made  for  him ; 

Provided  further,  That  if  such  person  is  a  minor 
or  an  insane  person,  or  is  absent  from  the  United 
States,  or  is  unable  owing  to  serious  illness  to 
make  the  return  and  application  above  provided  for, 
the  return  and  application  may  be  made  for  him  or 
her  by  the  person  required  to  withhold  and  pay 
the  tax,  he  m.aking  oath  under  the  penalties  of  this 
Act  that  he  has  sufficient  knowledge  of  the  affairs 
and  property  of  his  beneficiary  to  enable  him  to 
make  a  full  and  complete  return  for  him  or  her, 
and  that  the  return  and  application  made  by  him 
are  full  and  complete." 

Where  the  individual  has  many  sources  of  income  he  may 
choose  the  source  from  which  he  may  claim  his  deductions 
and  exemptions,  but  when  deducted  from  one  source  they 
may  not  again  be  deducted  from  another  source.  In  the  event 
that  the  normal  tax  is  not  withheld  at  the  source  on  a  taxable 
income  owing  to  the  fact  that  it  consists  of  an  aggregation 
of  sums,  each  amounting  to  less  than  $3,000,  such  incomes 
must  be  reported  and  the  normal  tax  theron  is  then  collected 
by  direct  assessment. 

In  order  to  obtain  the  benefit  of  the  specific  exemption 
allowable  in  the  case  of  incomes  composed  of  interest  on 
corporate  obligations  the  Rules  and  Regulations  of  the  Treas- 
ury Department  require  the  American  Citizen  or  resident  alien 
bondholder,  or  his  agent,  to  execute  a  certificate  covering  each 
separate  issue  of  bonds  in  substantially  the  following  form, 

13 


I  I 


C, '  I 


which  certificate  is  to  accompany  the  coupons  when  presented 
for  payment: 


I  do  solemnly  declare  that  I, 


of  the  United  States,  and  residing  at 

of  $ — - —   bonds   of   the   denomination 


a  citizen  or  resident 

,  am  the  owner 

of  $^ —   each, 


numbers 


of  the  (name  of  debtor)  known  as  (particu- 


lar issue  of  bonds),  from  which  were  detached  the  accom- 
panying coupons,  due 191 — ,  amoimting  to  $ — - — ,  or 

upon  which  there  matured  ,  191 — ,  $  of  registered 

interest. 

I  do  (do  not)  now  claim  with  respect  to  the  income  rep- 
resented by  said  interest  the  benefit  of  a  deduction  of  $ 
allowed  under  paragraph  C,  section  II  of  the  Federal  in- 
come tax  law. 

Date ,  191—.  Name . 

Address 

In  the  case  of  interest  paid  by  check  to  a  registered 
holder  the  above  certificate  duly  executed  must  be  filed  with 
the  debtor  corporation  at  least  five  days  before  the  due  date  of 
such  interest  (and  not  later  than  thirty  days  prior  to  March 
i).  The  tax  will  not,  however,  be  withheld  on  coupons  or 
registered  interest  maturing  and  payable  before  March  i,  1913, 
although  presented  for  payment  at  a  later  date. 

If  the  amount  of  income  in  question  from  a  given  source 
does  not  equal  the  exemption  allowable,  exemption  is  claimed 
on  that  amount  only  and  the  balance  of  exemption  may  be 
claimed  from  any  other  source. 

If  the  above  certificate  is  not  executed  and  presented 
the  normal  tax  of  i  per  cent,  is  withheld  and  the  collecting 
agency  executes  a  prescribed  form  in  lieu  thereof  to  be  re- 
turned to  the  Government,  the  collecting  agency  requiring 
"the  persons  tendering  such  coupons  or  orders  for  registered 
interest  to  satisfactorily  establish  their  identity." 

The  normal  tax  on  many  bond  issues  will  undoubtedly 
be  borne  by  the  corporations  owing  to  the  clause  in  their 
indentures  guaranteeing  the  payment  of  interest  without  de- 
duction for  any  tax  which  they  may  be  required  to  deduct 
therefrom. 

When  the  normal  tax  is  withheld  by  foreign  exchange 
dealers  such  deduction  will  be  duly  stamped  on  the  instru- 
ment representing  the  payment  of  the  income.  If  exemptions 
are  to  be  secured  from  this  quarter  the  certificate  above  given 
must  be  executed. 

14 


i 

i 


Where  coupons  or  interest  orders,  presented  for  payment, 
represent  the  interest  on  bonds,  or  other  similar  obligations, 
owned  by  a  partnership,  they  shall  be  accompanied  by  a  certi- 
ficate of  ownership,  which  shall  be  signed  either  in  the  firm's 
name  by  one  member  of  the  firm  or  by  each  individual  member 
of  the  partnership,  and  the  normal  tax  shall  be  withheld  by 
the  debtor  with  respect  to  the  income  represented  by  said 
interest. 

The  following  certificate  should  be  used  when  coupons 
or  interest  orders  are  presented  by  citizens  or  residents  of 
the  United  States  for  collection  of  interest  on  bonds,  or  other 
similar  obligations,  owned  by  the  partnership  of  which  they 
are  members: 


of 


I, 


-,  a  member  of  the  firm  or  partnership  of 
and   residing  at  (give   full   address)    do 


solemnly  declare  that  the  said  partnership  is  the  owner 
of  $  bonds   of   the    denomination   of   $-— —   each, 

Nos. of  the  (give  name  of  debtor)  known  as 

(describe  the  particular  issue  of  bonds)  from  which 

were  detached  the  accompanying  interest  coupons,  due 

191 — f  amounting  to  $ — ,  or  upon  which  there  matured 

191—,  $ of  registered  interest,  and  that  the  name 

and  address  of  said  firm  or  partnership,  and  the  names  of 
the  individual  members  thereof,  and  their  places  of  resi- 
dence, are  as  follows: 

Names  of  partners:  ■■ 

Address : 


Name  of  partner  signing: 
Of  firm  of:  . 

Address:  — — ^— 
Date  191—. 

Any  member  of  a  partnership,  who  is  entitled  to  a  de- 
duction (under  Paragraph  C,  Section  II,  of  the  Income  Tax 
Law)  of  his  pro  rata  share  of  the  tax  which  may  be  withheld 
at  the  source  on  interest  on  bonds  owned  by  his  copartnership, 
as  above,  may  claim  such  deduction  or  allowance  when  he 
shall  make  his  individual  income  tax  return  for  the  year  in 
which  said  deduction  at  the  source  was  made. 

Non-resident  foreigners  owning  interest  bearing  bonds 
are  not  subject  to  taxation  on  income  from  such  bonds  if 
proper  certificate  is  furnished. 

This  tax  will  not  be  deducted  from  the  income  which  may 
be  derived  from  interest  on  bonds,  mortgages,  equipment 
trusts,  receivers'  certificates  or  other  similar  obligations  of 

IS 


which  the  bona  fide  owners  are  citizens  of  foreign  countries, 
residing  in  foreign  countries,  provided  that  such  interest 
coupons  or,  in  case  of  wholly  registered  bonds,  the  orders  for 
the  payment  of  such  interest  shall  be  accompanied  by  duly 
certified  certificates,  hereinafter  provided  for,  to  cover  the 
cases  of  foreign  and  non-resident  owners  of  bonds  and  other 

securities. 

Unless  such  proof  of  foreign  ownership  is  duly  furnished 
the  normal  tax  of  i  per  cent,  shall  be  deducted  as  herein  pro- 
vided. 

Such  certificates  shall  be  in  substantially  the  following 

form: 

I  do  solemnly  declare  that  I  am  not  a  citizen  or  resident 
of  the  United  States  of  America,  but  a  subject  (or  citizen) 

of and  that  I  am  the  owner  of  $— —  bonds  of  the 

denomination  of  $ — ■ each,  numbers  ,  of  the  

(give  name  of  debtor  corporation),  known  as  (de- 
scribe  the   particular   issue   of   bonds)    bonds,   from   which 

were    detached    the    accompanying    coupons,    due   

191 — ,  amounting  to  $ — ,  or  upon  which  there  matured , 

19l— ,  $-_ of  registered  interest,  and  that  being  a  non- 
resident foreigner  I  am  exempt  from  the  income  tax  im- 
posed on  such  interest  by  the  United  States  Government 
under  the  law  enacted  October  3,  1913.  and  that  no  citizen 
of  the  United  States,  wherever  residing,  or  foreigner  resid- 
ing in  the  United  States  or  any  of  its  possessions,  has  any 
interest  in  said  bonds,  coupons  or  interest. 

Signature  of  owner  of  bonds . 

Address . 

Date  ,  191—. 

XIV.  ASSESSMENT  AND  PAYMENT  OF  TAX: 

All  persons  shall  be  notified  of  the  amount  for  which 
they  are  respectively  liable  on  or  before  June  i  of  each  year, 
and  the  tax  must  be  paid  on  or  before  June  30. 

"To  any  sum  or  sums  due  and  unpaid  after  the 
thirtieth  day  of  June  in  any  year,  and  for  ten  days 
after  notice  and  demand  thereof  by  the  collector, 
there  shall  be  added  the  sum  of  5  per  centum  on  the 
amount  of  tax  unpaid,  and  interest  at  the  rate  of  i 
per  centum  per  month  upon  said  tax  from  the  time 
the  same  became  due,  except  from  the  estates  of 
insane,  deceased,  or  insolvent  persons." 


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